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THE HOYOS FILE: REDjet’s theory of flight

Patrick Hoyos

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If there were a religion called “The Church of Low-Fare Airlines”, Ireland would be its spiritual home, Ryanair its cathedral, REDjet its missionary outpost, and Ian Burns its priest.
“We are trying to be as consumer-friendly as we can be, given that we are basically an Internet-selling business,” Mr Burns told a Press conference recently to announce the official launch date of its Barbados to Port-of-Spain service, which begins August 8.
The announcement the next day that Jamaica had opened its doors – well, skies – to REDjet as well was akin to having your Guinness and drinking it too.
The affable Mr Burns had done it. With the help of our Prime Minister, who reminded me (in a positive way) of the fictional fellow in the movies who made people offers they could not refuse, all Mr Stuart had to do was to say publicly that he now understood the game and he could play it if the other prime ministers wanted him to, and suddenly it was game over.
Concerns over aircraft safety and predatory pricing (a rich notion coming from Trinidad and Tobago) disappeared in the time it takes a sno-cone to melt on Accra Beach.
REDjet was welcome in the two biggest markets of the Caribbean.
So how can this airline be sustainable with fares less than half those of its competitors? Here is where the strategy comes in, but Mr Burns doesn’t take personal credit for dreaming it up.
“We’re just taking what works, has worked and continues to work around the world,” he said last week.
“In every region the people who have gone in and done low-fare airlines first and done it well – that first-move advantage, which we have on the market – have done exceedingly well.”
First-move advantage? That is a concept associated with chess, while “first mover advantage” refers to a company with, say, a patent which can dominate its category until the competition catches up.
How does he apply it to airlines?
“The reason for the low fares is to grow the market, not compete for existing market share with LIAT and other carriers,” he said. “We want to create that sense of adventure and spirit in people. That has just not been made possible by the incumbent airlines.”
Of course, this is part of the diplomacy of the REDjet team. We can all live together. We will grow the market, not take your business.
But I doubt REDjet can survive if it doesn’t become the airline of choice for intra-regional business travellers, who have been sorely mistreated by LIAT since they started their price war against all of its customers.
At least the REDjet model is more palatable than LIAT’s, which has been to buy out the competition and then raise prices by wielding monopoly power.
Mr Burns said the airline was helped by recessionary times. “The recession has been a key driver for us, because it has meant we can acquire and do long-term contracts,” he noted.
“People who grow their businesses through booms pay excessively for things, so when recession comes, they are stuck with really high costs. We would have paid more than twice the money we have paid for our assets twelve months before” due to market conditions.
What about the price of fuel?
“If we have to put up our prices because fuel goes up, so will everybody else. It’s the differential in the price of the ticket that’s important,” said Mr Burns.
He recalled when Ryanair first came into Ireland, the minister of civil aviation was under great pressure to protect the country’s national airline Aer Lingus, which was losing over a hundred million dollars a year.
But Mr Burns said the launch of Ryanair had brought “a huge amount of growth into Ireland” and led also to the turnaround of Aer Lingus “against all the odds”.
He added that Ryanair was now the biggest and most successful of all the low-fare airlines in the world. And Ireland, “a small country next to a big land mass, now has over 300 aircraft and carries 70 million people a year”.
And there you have REDjet’s theory of flight: low fares equal exponential growth from pent-up urges to crawl the skies, thereby fanning the embers of the region’s flickering economies.
And as with most religions, for it to work, you just gotta believe.